PGP-1 IIM -Indore Batch 2010-12

SBM-1 (B-Plan)

‘Utthan’: Human Capital Provider

“Channelizing and Organizing labour migration and improving lives”

Instructor: Prof. Lalitha Sreenath

Participants (Group 15):

• Sandeep Kumar Bhardwaj (2010PGP328)

• Sandeep Kumar (2009PGP178)

• Sandeep Shekhar (2010PGP329)

• Saneh Yadav (2010PGP330)

• Sanjay Kumar Gupta (2010PGP331)

Date of Submission: 31 August 2010

Executive Summary

No country is better poised to take advantage of the demographic dividend than India.
• In 2020, the average age in India will be only 29 years, compared with 37 in China and
United States, 45 in Western Europe, and 48 in Japan. Moreover by 2025, 70% of Indians
will fall under the category of working age, up from 61% currently.
• The idea is if we could harness this dividend, it would not only be a huge, profitable
business for us, but for the people, especially for those who are below the poverty line, as
well.
As the country’s population is increasing at a fast pace, there is a huge demand for employment
and financial inclusion of the have-nots. If the country is not able to meet this rapidly increasing
demand to a sufficient level, then this ‘population dividend’ can become a serious problem. Our
idea is to provide the employment and a chance to the poor so that they can be included in the
development of our country, company and their own. This requires a serious concern to develop
many of our organized and unorganized sectors.
The labour/workforce sector is a major source of employment generation. But the major portion
of this sector is unorganized. Out of India’s huge labour force, over 390 million strong, only 7%
are in the organized sector. Even the term ‘organized’ is seriously misleading because only half
of the 7% is unionized and in the vanguard of working-class politics.
‘Organized sector labour’ means workers on regular wages or salaries, in registered firms and
with access to the state social security system and its framework of labour law. The rest — 93%
of the labors force — works in what is known as the ‘unorganized’ or ‘informal’ economy.
Aim of ‘Utthan’ is to contribute towards this unorganized labour sector and provide new
opportunities of growth to the migrant labourers. We ought to provide them with a fixed regular
source of income, convert them from unskilled labourers to skilled ones and in turn, helping
them in improving their lives and living standards.
There is a huge labour migration in India from one city to other, from one state to other. The
reasons are well known, i.e. in search of better livelihood. But, it’s not an easy task for a person
to leave his/her original place and move to a new one. The state of an unskilled labourer who is
planning to migrate to some town, in search of a better future can be as follows:
• He is confused about where to go and how he will be able to find a job in the new place.
• He is unsure of what his destiny has for him in the future.
• It’s a kind of obligation on him as he is left with no other option, but to migrate.
• In case, he is being accompanied by his family then the safety, security and logistic
issues (residential concerns) are much more.
This business will facilitate the migration of labourers and will intend to ‘organize’ the
‘unorganized’ labour market/migration. Besides this, it will also work towards converting this
unskilled mass into a better skilled manpower. On the other hand, it will be a reliable source of
labour supply to contractors, manufacturing companies, schools, colleges and a number of
clients requiring unskilled and skilled workforce. It will open a Pandora of new opportunities both
for workers as well as business. It will be a win-win situation for both of them.
COMPANY OVERVIEW
‘Utthan’ will start its operations in the northern part of the country and will provide a range of
skilled and unskilled manpower solutions to a number of clients and individual households.
Labourers, both skilled as well as unskilled, will be hired from nearby villages and small towns in
Bihar, where there is a huge migration rate, to form a part of our organization. They will be
employees of our organization and will work at our client premises. They would be turned from
unskilled labourers to skilled ones over a period of time by providing vocational training. The
organization will earn its revenues from outsourcing the skilled and unskilled workforce and
through the transfer of employment of labourers to other manufacturing/service companies.
The mission of our organization would be to ‘organize’ the labour market in India and help
improving their living conditions, while being sustainable and profitable.

DESIRED SOCIAL IMPACT

The business plan addresses the social problems of the skilled and unskilled labourers in the
villages and cities. The major problems, which the organization aims to solve, are as follows:
• Organize the unorganized labour market and enable them to earn a better livelihood.
• Improve their living standard by providing them with an opportunity to get better wages
and proper developing environment.
• Provide training to unskilled labourers, so that they could develop into skilled workforce.

MARKET STRUCTURE:
Labour market consists of 3 sectors.
1. Rural workers constitute over 60% of the workforce.
2. Organized sector employs 8% of the workforce, producing 40% of GDP. But its
employment share declining.
3. Urban informal sector is the growing sector – represents the residual.
Labour market consists of 430 million workers in 2004-05, growing 2% annually, with a stable
worker-population ratio of 40%. India’s agriculture industry employing 238 million in 2006-07 is
almost 100% informal in employment according to NCEUS report. Manufacturing sector
employs the largest share of women unorganized workers.

MARKET TRENDS:
• India's labour force is growing at a rate of 2.5 per cent annually, but employment is
growing at only 2.3 per cent. Thus, the country is faced with the challenge of not only
absorbing new entrants to the job market (estimated at seven million people every year),
but also clearing the backlog.
• More than 90 per cent of the labour force is employed in the "unorganized sector", i.e.
sectors which don't provide with the social security and other benefits of employment in
the "organized sector."
COMPETITION:
• The main competition is from agencies using the unskilled labourers without using some
proper channel i.e. simply satisfying the labour requirement of some clients. These are
basically informal groups or places in certain localities like the ‘labour chowk’ concept in
some parts of northern India.
• Government policies like NREGA which provide job opportunities to labourers in nearby
areas is another competitor. But the effectiveness of NREGA is under question.
Moreover NREGA guarantee only 100 days of employment per India and it is not market
oriented i.e. labourers will get a predetermined wage rate not influenced by market
trends. As a result through such government policies workers can’t reap benefits of open
market.

OPPORTUNITIES/THREATS:
Opportunities:
• The labour market in India has a huge potential. The population of our country is quite
young in comparison to other countries. The huge size of labour market (475 million
approx) provides us a vast opportunity to expand.
• This is a niche market for private players as most of the contract labourer service
providers in urban areas focus on locally available labour. The size and reach of these
players is geographically limited focusing on the needs of particular cities.
• As per Credai, Confederation of Real Estate Developers Association of India, the
construction sector is facing a labour shortage of around 10 million persons in any given
day and the situation will worsen in next decade when requirement for workers is
expected to go up three-fold. ‘Utthan’ will focus on the real estate sector to empower the
labors engaged in it.

Threats:
• In certain parts of the country like Mumbai, labourers from outside the state are not a
welcome phenomenon. This is because of the psychological belief that they are taking
away jobs of local population. Care needs to be taken to protect labourers from such
threats and awareness should be created about the importance of migrant labourers in
growth of urban sector.
• The local contractors who make money on the confusion and unorganized nature of
labour market can be a barrier in our approach to the unskilled labourers.
• Changes in government policies, labour laws can affect our business strategy.

OFFERINGS:
• To provide free consulting service to labourers informing them about the growth
opportunities present in their nearby areas or other parts of our country.
• Remove confusion and fear from the minds of the workers regarding their future in other
cities.
• Financial aid to needy labourers.
 • Offering low price mobile connections, so that they stay in constant touch with their near
and dear ones.
• Vocational training to convert unskilled labourers into skilled ones. So that they can shift
to better paid jobs.
• Residence facility for labourers who have their family along with them.
• Providing labors unskilled and skilled to various clients such as construction companies,
institutes etc.
• A web portal where the clients can directly book their requirements through advance
payment. We’ll provide the required work force to client on the desired date.

FOLLOW-ON SERVICES:
• Banking and insurance facility for labourers.
• All the employed labourers will be connected with the regional offices 24 * 7. So that
any urgent needs of the clients can be met and labourers will be notified of change in
location dynamically.
• Export of skilled labourers to other parts of world.

Marketing Plan:

• Brand Strategy:
The service is viewed as a source of improving the life and providing skills to the
unskilled man power. From clients point of view it will be a continuous and reliable
source of manpower.
We focus on promoting our brand 'Utthan’ as a Human development and service
provider. By involving ourselves in various social initiatives we’ll promote the social
focus of our brand. The word of mouth popularity from empowered workers will go a
long way in promoting the brand value.

• Distribution Strategy:
Our centers will be present in different locations some of them will be in major districts
of states like Bihar and U.P. These centers will be responsible for providing and proper
channelization of migration of new unskilled labourers to other parts of country. Our
centers in cities of Punjab, Haryana, and NCR region will act as labour source and
development centers. These centers are responsible for timely supply of labourers to
the clients. These are also responsible for providing vocational training to labourers and
converting them into skilled workforce. Initially because of financial constraints we are
focusing on limited parts of the country. Large scale expansion to various parts of the
country and increasing the depth and width of organization reach is one of the high
priority long term goals.
 • Pricing Strategy:
 The consulting service we provide to labourers is free of cost.
 We’ll charge a nominal interest on the financial aid if one has applied for it.
 Our services like mobile connection will not bear any extra charges. Labourers are
required to pay the charges set by the mobile companies. However we’ll try to bring
better deals for this segment by negotiating with mobile operators.
 We are expecting to gain 10% higher wages for our workers in comparison to the
minimum market price. 5% of this above market price profit will be companies share
remaining entire benefit will be passed on to the workers.
 Vocational courses will have a registration fees depending on the kind of training.
The average fees will be around Rs. 1500 per person. Labourers will have an option
to pay this amount in small installments.

• Promotion:
 Campaigns organized in different parts so as to make the unskilled people aware of
our service.
 Since the literacy level of the masses in the rural areas is quite low, we’ll promote our
services by establishing stalls in various social events like ‘melaas’, social
gatherings etc.
 ‘Sarpanch’ of village will be made aware of the benefits and the future opportunities
our service provide. The support of village ‘sarpanch’ will go a long way in promoting
the credibility of service and strengthens our relationship with the villagers.
 In towns and cities we’ll promote our service through mass marketing media like FM
Radio, local newspaper.
 Informing big companies and corporate requiring large manpower, through on site
presentations.
 Online promotion through Google Ads.
 Viral promotion through blogs, networking sites, videos etc. So as to target individual
clients (households) who require unskilled or skilled workers like plumber, electrician
etc.

THE ORGANIZATION

Services Provided by the Organization:

Services provided by the organization could be broadly classified under:
Unskilled Labour: Some of the sectors where unskilled labourers could be engaged in
are as follows:

• House Keeping / Cleanness Services:

 Cleaning is not just removing the dirt, but enhancing aesthetics and increasing
assets life. Our organization will ensure that the client’s premises look beautiful
and pristine and save their money at the same time.
• Construction Labour:
Construction labour plays a very significant role in the industrial world. With the
advancement of time we can see a tremendous growth in this field.
Skilled Labour: Some of the sectors where unskilled labourers could be engaged in are
as follows:
• Driver:
Driving is something which is enjoyed by many and is the way of earning their
bread. Unskilled labourers could also be provided training and utilized as drivers
as time passes.
• Electrician:
Electricians are in huge demand for individual households as well as for big
corporate and the organization will train its personnel so that they could be
deployed as electricians.
• ITI Manpower:
ITI service is one of the best possible options for skilled. People having
significant skills could be trained to be ITI diploma holders and can be trusted
upon by the organization.

Organizational Structure:
Having a lean but effective organizational structure will be critical for the organization. It will
involve how the business organizes, categorizes and delegates tasks to achieve the goal of
being a profitable business as well as serve a unique social need. It will determine how the
business decisions are made and implemented at all levels of the business and ensure that all
critical roles and responsibilities are covered.
The activities of the organization could be divided into the following broad categories:
Deploying Unskilled Labors: The unskilled labourers that become a part of the
organization will have to be engaged in work that they can perform without mush
hassles. They would be mostly put under various construction works, cleaning works
going around.
Deploying Skilled Labors: The skilled labourers will be engaged in work as per their
skill set and will be deployed as carpenters, plumbers, electricians etc. They will be
assigned to both individual households and organizations.
Training Unskilled Labors: Unskilled labourers will be given vocational training to so
that could get hold of various skills and transform themselves from unskilled labourers to
skilled labourers. The organization will have tie ups with several institutes providing
vocational training so that the unskilled labourers could be trained in mass at lower
costs.
 Managing External Relations: The organization will need to have tie ups with various
entities such as training institutes, mobile network operators etc and the success of the
company will to a large extent depend on the efficient and effective service provided by
these partners. Hence managing relationship with these partners and overseeing their
effectiveness will be of utmost importance.

Executive
Director

Assistant
Executive
Director

Director
Director External
Director Vocational
Skilled Relations
Unskilled Training
Labor Director
Labor

Manager Manager
Manager Manager
Vocational External
Unskilled Skilled Relations
Training
Labor Labor

Unskilled and Skilled Workforce

Fig.1 Organization Structure

Key Management Roles
Several key management roles will be required within the organization which is as follows:
Executive Director: The organization will be headed by the Executive Director. He will
be responsible for setting strategy of the organization and ensuring that it delivers on its
mission and is heading towards the right direction.
Assistant Executive Director: Assistant Executive Director will work closely with the
Executive Director and will play key role in taking the decisions related to the overall
Management of the organization. He along with the Executive Director will be
responsible for the appraisal of the 4 Directors working under them.
Director of unskilled labour: The primary role of the Director of unskilled labour will be
responsible for the overall development of the unskilled labour and to ensure that they
are being utilized effectively.
 Director of Skilled Labour: Director of Skilled Labour will look into the development of
the skilled labour ensure that the skill set of the labourers is in sync with the demands of
the industry.
Director of Vocational Training: The unskilled labourers will be provided vocational
training so that they would be able to develop themselves and are able to perform skilled
work. The Director of Vocational Training will be responsible for tie ups with the various
training institutes and maintaining the relation with them. He will also decide on the kind
of training required after consultation with the top level management.
Director of External Relations: The organization will have to maintain good relation
with all the agencies which require labourers. Labourers will be provided mobile
connections through bulk deals and the organization will earn a part of its income
through commission provided by the mobile company. Director of External Relations will
be responsible for maintaining good relations with these external agencies.

BOARD OF DIRECTORS
Board of Directors will have the responsibility for overseeing the activities of the organization.
The Board size will be limited to six Directors. The Executive Director will have an ex-officio
position on the board. The board members will have extensive fundraising obligations and
would have made significant contributions to the organization. The Board of Directors will
convey two to four times per year to review the current activities of the organization and conduct
strategic planning for the future.

Relation between Organization, Clients and Workers

The relationship between the Client and the organization is captured in a Client Service
Agreement (CSA). As per the agreement, the organization will act as the employer of the
employee who works at the clients premises. Under the agreement the organization will assume
responsibility for the personnel administration and compliance for most employment related
government regulations, while the client will get the employee’s services but cannot directly hire
the employee.

FINANCIAL ANALYSIS

The following sections contain the financial feasibility information for the company.

(All the figures shown below are in INR).

The table shown below indicates the forecasted annual projections of daily wages in the
targeted five states for the next five years:

Target State-wise Daily Wages (market rate) Forecast

State/UT 2010-11 2011-12 2012-13 2013-14 2014-15
Chandigarh 175 184 193 203 213
Delhi 181 190 200 210 220
Haryana 176 185 194 204 214
Punjab 129 135 142 149 157
Uttar Pradesh 108 114 119 125 131

The number of labourers is projected to grow at the rate of 50% in the first four years and by
100 % in the fifth year.

2010-11 2011-12 2012-13 2013-14 2014-15

No. of labors 1500 2250 3375 6750 13500
 Fig. 2 Projected growths in the number of labourers in the coming 5 years

State Wise total minimum daily wage Forecast

Total daily wages = No. of labourers in the state for a particular year * Daily wage rate for that
year

State-wise Total Minimum Daily Wages Forecast

State 2010-11 2011-12 2012-13 2013-14 2014-15
Chandigarh 262500 414000 651375 1370250 2875500
Delhi 271500 427500 675000 1417500 2970000
Haryana 264000 416250 654750 1377000 2889000
Punjab 193500 303750 479250 1005750 2119500
Uttar Pradesh 162000 256500 401625 843750 1768500
Total expected
wage 1153500 1818000 2862000 6014250 12622500
 Fig.3 Projected growth in the daily wages for the coming five years

Revenue generated from the wages of labour at market cost in the five states is shown in the
table below. An additional 10% is charged from the client, which is equally shared between the
labour and company.

Year 2010-11 2011-12 2012-13 2013-14 2014-15

Total Revenue 1268850 1999800 3148200 6615675 13884750

Net daily additional income for our regular workers (half of the additional 10% charged from
clients is paid to workers as an employee benefit scheme):

Year 2010-11 2011-12 2012-13 2013-14 2014-15

Daily amount paid to
labourers 1211175 1908900 3005100 6314963 13253625
Market rate (daily) 1153500 1818000 2862000 6014250 12622500
Net total additional income to
labourers (Employee benefit) 57675 90900 143100 300712.5 631125
Total number of employees 1500 2250 3375 6750 13500
Daily net profit of each
labour 38 40 42 44 46
Net daily profit after paying to labour is shown in the table below:

Year 2010-11 2011-12 2012-13 2013-14 2014-15

Total Revenue 1268850 1999800 3148200 6615675 13884750
Cost of labour 1211175 1908900 3005100 6314963 13253625
Net profit after paying to
labour 57675 90900 143100 300712.5 631125

Fig.4 Projected daily net profit of a labour

Start up Expenses

Ghaziabad is chosen as our strategic location for five adjacent states. The table shown below
depicts the start up expenses:

Start-up Expenses INR

Legal Expenses 200000
Expenses on office inventory 550000
Brochure Expenses 100000
Insurance 500000
Prepaid expenses for procurement
office in Bihar 50000
Expenses on sales office in
Ghaziabad 2500000
Miscellaneous Expenses 500000
Total Start-up Expenses 4400000
Fund Raising

We would need an initial fund amounting Rs. 44 lakhs to start our operations. We will be raising
money from limited number of private sources. The subsequent funding requirements will be
met by the organization itself as it expands in scale to fulfil its mission. The Board of Governors
will help us to raise funds from corporate.

Fig.5 Start-up Expenses

Forecasted Income Statement for the year 2010-2011

April M

Office
350000
Employeess
The balance sheet has been prepared by using the real market values, as depicted in the earlier
sections. The forecasted total net profit (before deducting the initial start-up expenses) for the
year 2010-11 = Rs (306117*12) = Rs. 36,73,404

Payroll
Marketing
350000
Payroll
After deducting the initial start-up expenses of Rs. 44 lakhs, net profit in the year 2010-11 = Rs.
(36,73,404 – 44,00,000) = – Rs. 7,26,596. This means that we are making a net realizable loss
of Rs. 7,26,596 in the first year of our operations. Going by the same trend, we will achieve our
breakeven after 3 months of the first year of our operations, i.e. after 15 months from inception.

Fig 6 Breakeven Analysis

We’ll focus to improve and expand our service to other parts of the country. ’Utthan’ will be a
turning point in the unorganized labour market and will be the change that is required to
leverage the ‘demographic dividend’ of our country.